Advertisement
  1. Archive

SILICON CEILING

Published Sep. 27, 2005

On a recent morning in a converted warehouse, Grace Chen faced an interrogation worthy of a TV cop show.

After an hour, Chen departed, her lipstick smudged, exhausted but not defeated. "I want to do this for women," she said.

Her interrogators were two businesswomen who hammered at details of her business plan for a start-up aimed at standardizing community banking online. They challenged her revenue model and raised concerns about privacy issues and e-commerce.

Chen went through her ordeal-by-questioning for an opportunity to move her Houston company to the Women's Technology Cluster. The San Francisco non-profit was the first incubator in the country dedicated to hatching women-owned businesses.

For Chen, who has yet to hear whether she has been accepted, a lot is at stake. Cheap office space. Free legal and business advice. And most of all, exposure to the mostly male pack of venture capitalists in Silicon Valley.

You don't automatically get in to the Women's Technology Cluster just because you're a woman. The relentless verbal scrutiny simulates the interviews that chief executives face when pitching their companies to venture capitalists, said Margarita Quihuis, the incubator's director.

"It's harder than getting into Stanford Business School," said Quihuis, who doesn't mind rattling candidates such as Chen with tough questions. "I get to cherry-pick and find the best women. Just this Monday, I rejected 22 business plans."

The tech cluster, which hosts about 10 start-ups at a time, gives a company about two years to succeed before it is kicked out to stand or fall on its own. The cluster, a non-profit that's almost 2 years old, has raised more than $50-million for its companies and graduated four companies.

Although it requires only that one person on the management team be a woman, most of its companies have women as CEOs. The cluster operates with a staff of three on an initial $150,000 contribution from former Cisco Systems Inc. executive Catherine Muther and a $1.5-million annual budget funded by donations and grants from the city of San Francisco and charitable organizations such as the W.K. Kellogg Foundation.

But it also charges tenants an admission fee of 2 percent of the company's stock. At this early stage, Quihuis said she has yet to see that return on any of the incubator's investments.

Still, the incubator has sparked plans to open similar sites in Austin, Texas, Seattle and Washington. The only other incubator for women-owned businesses thought to be operating in the United States is Ground Floor Ventures in Hoboken, N.J., a commercial group that charges its participants on a sliding scale.

Like other business incubators, the Women's Technology Cluster provides a low rent by San Francisco standards ($3.50 per square foot a month), provides seminars each week on distinguishing a company from all the other wannabes and offers support from others going through the same process.

But most CEOs say the most important aspect of this women-only incubator is that it can get a company funded.

Because women don't meet and mingle in the same networking circles as venture capitalists, who are predominantly men, they have more trouble getting funding, Quihuis said.

"Silicon Valley is like a very small town," Quihuis said. "It's all about who you know. Your social capital and reputation are what counts."

Nine percent of the deals venture capitalists make are with women. But they invest less than 3 percent of their portfolios in women-owned companies, according to a recent study by the National Foundation for Women Business Owners and Wells Fargo.

Tiffany Bukow came to the tech cluster because she wanted more exposure for her company."Finding venture capital has been daunting," said the CEO of MsMoney.com, a financial site for women.

MsMoney.com just received $3-million in first-round funding from individual investors.

Though the number of start-ups run by women that are getting funded is still low, the future looks promising, said Denise Brosseau, the president and co-founder of the Forum for Women Entrepreneurs, whose organization also is housed in the Women's Technology Cluster.

"I'm optimistic because if you look at the way companies are formed," Brosseau said, "women are now at the stage where they are establishing their track record."